BA 211 Key Business Terms Quiz 1

Income Statement

A financial statement that shows a company's Revenue, Expenses and Net Income. The income statement shows how much profit or loss a company generates over a period of time—a month, a quarter, or a year. The income statement is sometimes referred to as the earnings statement, profit and loss statement, or P&L. The layout is: Revenue - Expenses = Net Income (or Net Profit). It closes out to Retained Earnings after the end of the year.

Emergency Loan

A loan automatically given in the simulation when a company runs out of cash. In the real world, emergency loans do not exist. When you run out of cash, you have a "Liquidity Crisis," "Chapter 11," or "Bankruptcy" on your hands.

Balance Sheet

A means of summarizing a company's financial position at a specific point in time. The Balance Sheet equation is: Assets = Liabilities + Owners' Equity. The "left side" of the Balance Sheet (Assets) shows what the company owns. The "right-side", or labilities an equity, shows who paid for the assets. The Balance Sheet is considered a "snapshot" of company's current financial position.

Productivity

A measure of your workforce output

Retained Earnings

An accumulation of annual net income left after payments of dividends reported on a company's balance sheet. Basis computation is: Previous year's Retained Earnings + Net Profit - Dividends = Ending Retained Earnings.

Equity

Comprised mainly of Common Stock and Retained Earnings (shown on the right side of the Balance Sheet). Represents how much of company assets were paid for by owners or shareholders. On a balance sheet, equity is referred to as shareholders' equity or owner's equity.

Cost of Goods Sold

Cost of Goods Sold or (COGS). Expenses that are tied to the sale of each unit, primarily direct labor and materials costs. See Variable Costs

Variable Costs

Expenses that are tied to the sale of each unit, primarily direct labor and materials costs (aka Cost of Goods Sold)

Liabilities

Liabilities include Accounts Payable, Current Debt and Notes Payable (shown on the right side of the Balance Sheet). Represents how much of company assets were paid for by bankers, bond holders, or other creditors.

Net Earnings

Net Earnings (See Net Income)

Net Profit

Net Profit. (See Net Income or Net Earnings)

Net Income

Net income (or Loss). The income (or loss) of an organization after deducting the expenses, including interest and taxes, incurred in earning that income. It is usually the last amount on the Income Statement.

Owner's Equity

Owner's equity. See equity.

Promotion

Promotion (aka Promo Budget) The process of creating product awareness before customers shop (driven by the Promo Budget in the simulation)

Financial Statements

Reports of a company's financial performance. The three basic types of statements included in an annual report are: the Income Statement, the Balance Sheet, and the Cash Flow Statement. These statements provide different financial perspectives on a company's performance.

Sales

Sales. Dollar amount given in exchange for product (aka Revenue, Top Line)

Shareholder's Equity

Shareholders' equity. See equity.

Cash Flow Statement

Shows a company's sources and uses of cash as well as the net change in cash for a company in a given period. It's categories are cash from (1) operating activities, (2) investing activities and (3) financing activities. It shows the flow of cash in, through, and out of the company.

Revenue

The amount recognized on the sale of a product or service. (aka Sales)

Assets

The economic resources of a company. Assets are listed on the Balance Sheet and commonly include cash, accounts receivable, notes receivable, inventories, land, buildings, machinery, equipment, and other investments.

Placement

The process of making the product accessible in a way which is convenient for consumers. (driven by the Sales Budget in the simulation)

Sales Budget

The sales budget drives accessibility, which governs everything during and after the sale.